Tourists and Office Workers Revive Rental Demand in Central London

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London’s rental market is showing signs of revival after several years of instability. Tourist districts are seeing a surge in visitors, supporting rent growth. Foot traffic has already surpassed pre-COVID levels, though rental rates themselves remain below pre-crisis highs, Bloomberg reports.

The return of tourists and office workers has revitalized central districts such as Covent Garden, Soho, Chinatown, and Carnaby Street. These areas once again serve as major retail and leisure hubs, with visitor numbers exceeding 2019 levels. However, rental prices still lag behind pre-pandemic figures, reflecting the impact of mass store closures and high vacancy rates during lockdowns.

Shaftesbury Capital, the largest landlord in London’s West End, confirmed the trend. Estimated rental values in its portfolio grew 2.9% in the six months to June 2025, lifting the total asset value by 3.1% to £5.2 billion. Earnings per share increased 16% to 2.2 pence.

The company has also reduced vacancy rates, which fell from 3.9% at the end of 2024 to 3.5% by mid-2025. Shaftesbury further cut its leverage after selling a 25% stake in Covent Garden to Norway’s sovereign wealth fund. Debt financing dropped from 28.2% to 17.3%. CEO Ian Hawksworth noted that the West End portfolio remains lively, with high footfall and active trading seven days a week.

Cushman & Wakefield experts [url=https://internationalinvestment.biz/real-estate/5743-ofisnyj-rynok-londona-ot-sokraschenij-k-rostu-sprosa-i-arendnyh-stavok.html]observed[/url
] similar dynamics in 2024: 78% of companies relocating within central London leased larger office spaces than before. New space absorption reached 4.1 million sq. ft. in 12 months, with net take-up of 3.27 million sq. ft.—a 75% increase compared to 2023.

Demand for offices is rebounding, particularly for modern and high-quality spaces. According to Cushman & Wakefield’s Ben Cullen, tenant priorities evolved from “less” to “less but better” and now to “more and better.” Knight Frank’s report echoed this trend: companies increasingly pursue expansion, improved facilities, and hybrid-friendly layouts. Hybrid models often require more space for collaboration and privacy, undermining cost-saving strategies.

Still, some firms continue to downsize—88 tenants reduced space during relocations in 2024. Yet the overall balance is shifting toward expansion, led by the financial sector. Central districts like the City recorded a historic high of 39 deals exceeding 5,000 sq. ft., accounting for 64% of all annual transactions. Tenants also prefer moving into new offices close to their previous locations to maintain commuting convenience.

Premium-grade buildings are in especially high demand. Properties with BREEAM or WELL certifications, flexible layouts, advanced engineering, and strong amenities lead the market. Knight Frank notes these offices remain the most sought-after despite rising costs. Older buildings are losing appeal, driving market polarization.

According to CBRE, prime London office rents grew 6.3% in 2024, with another 5–10% increase expected in 2025. Limited supply and heightened tenant demands for quality fuel this growth. However, rising tax and operating costs in the City may boost interest in alternatives like Canary Wharf, where rents are lower but supply remains high.

Vacancy data also reflects the turnaround. CoStar Group reported the UK office vacancy rate at 8.6% in March 2025, down from 8.7% at the end of 2024. This marks the first decline since the pandemic began. Although far above the pre-COVID level of 4.6%, the reversal signals renewed interest in physical office space.

In Q2 2025, prime rents in West End districts hit £160 per sq. ft. (€186)—a 9% quarterly increase and 21.7% year-on-year. In Marylebone, rents stood at £110 (€128), in the City nearly £100 (€116), and in fringe zones around £90–95 (€105–110). Demand is
also rising in Canary Wharf, with major tenants including Visa, BBVA, and HSBC expanding their footprint. Great Portland Estates reported that prime London office rents rose 8% and could increase another 10% within the year.